A stipulation of agreement in a divorce settlement divides a defined contribution plan as 50% of accrued benefits. The DRO states 50% of total account balances. There are nonvested employer contributions. Question: Does the phrase 50% of accrued benefits include or exclude nonvested contributions?

Your question raises at least three issues. First, for a defined contribution plan, a participant's "account balance" is their "accrued benefit." Second, a plan administrator does not have to (and should not) look behind a pending DRO to the underlying divorce decree. The DRO is the document that is controlling on a plan administer. Third, the DRO is probably not qualified if the participant has unvested and vested funds or contributions in several investment accounts, because it is not clear from the face of the DRO which funds or accounts the money should be taken from. Of course, the plan administator could have adopted QDRO procedures that address whether the funds are to be taken from vested funds first or pro-rata, but unless such procedures are in place, the plan administrator should not take it upon itself to interpret the terms of a DRO where there multiple interpretations are possible.

Looking at the language of Code s. 414(p), is it even possible to say that a QDRO can assign non-vested benefits? The statute says a QDRO creats the Alt. Payee's right to receive all or a portion of the "BENEFITS PAYABLE" w/r/t the participant. I'm thinking that the non-vested portion of the participant's account is not a "benefit payable" to the participant. This is supported by the rule that a QDRO can't assign any greater benefit to the Alt Payee than the participant is entitled to.

Unless you skate the issue by saying deferring it until the Alt Payee requests a distribution of his portion. So that if on day X his interest is 50% of "account balance," which is partially vested, his $ in hand will be more if he waits until day x+2 to request a distribution than if he waits until day x+1.

The rules of the DRO should be more clear. The manner for determining the amount or percentage of the participant's plan benefits to be paid to the alternate payee should be stipulated in more detail [see Code Sec. 414(p)(2)(b)]. Also, regarding the nonvested $$ issue, a QDRO can require that benefit payments to the alternate payee be recalculated when the
participant finally retires, or otherwise takes a distribution from his account. [see Code Sec. 414(p)(4)(A)] In any case, the language of the DRO should be clearer.